I commented to the Weekend Herald in the Landlords’ top suburbs article which was the front page of today’s Business Section. The article was all about the Westpac Property Investor Report which covered the last 12 months of average house price growth and rent increases by suburb/sub-area groupings and by number of bedroom and house type (house vs unit).

Three bedroom houses in Mangere Bridge and Glen Innes were the peak performers in the 12 months from 1 October 2013 – 30 September 2014. 2 bedroom units in Mt Wellington, Panmure and Point England also did very well in this period. The problem with these statistics is that they are two months out of date with is nearly 20% of the period of time covered, and the gains are very close and run the risk of sample bias from having quite small sample sizes. Remember all those election polls back in September that had the Green party at 15% yet on election night they recorded just 10%.

Cashflow is very important when you are a property investor, being one of the three pillars along with equity and growth. Wellsford has high gross yields as usual, being a small town towards the Auckland region’s northern most border (with Northland). CBD apartments can provide good cashflow too, but often leasehold apartments where you also pay ground rent and virtually always body corporate fees are excluded as this is too much data to collect, so yields are often over-stated. The South Auckland and city fringe two bedroom units take up the rest of the table. This table is subject to sample bias by breaking down the typology and number of bedrooms and doesn’t compare apples with apples by not taking body corporate fees into account when showing both houses and units.

I know that this is complex, as body corporates are an efficient way of administering multiple units and provide cost efficiency with insurance premiums and repairs and maintenance, however they are widely and correctly perceived to lower your gross yield. It is the net yields which are important and should be compared. Operating costs of any investments need to be budgeted and analysed.

The Westpac report provides a good general idea and is no doubt good for marketing purposes for the bank being front page news of the business section of the Weekend Herald, however it lacks any real depth to be meaningful.

]]>http://www.davidwhitburn.co.nz/last-years-hotspots-unlikely-to-be-this-years/feed/0Me in the NZ Herald on RBNZ policy for “Big” Investorshttp://www.davidwhitburn.co.nz/me-in-the-nz-herald-on-rbnz-policy-for-big-investors/
http://www.davidwhitburn.co.nz/me-in-the-nz-herald-on-rbnz-policy-for-big-investors/#commentsMon, 24 Nov 2014 00:16:12 +0000http://www.davidwhitburn.co.nz/?p=1218... read more]]>I was reported in the Weekend Herald’s Big Landlords Face Squeezearticle in the business section on Saturday just passed. I was commenting on the Reserve Bank’s likely regulation for “big” investors. The article said the Reserve Bank is working on new regulations for loans to big property investors which are likely to see them pay higher interest rates. Then is went on to say that details are still being finalised but the RBNZ wants banks to identify customers who are big property investors, possibly by assessing how much of their wealth comes from property. The RBNZ would then require banks to hold larger capital reserves to cover any potential future losses on those loans.

My comments on the Reserve Bank changes

Investors don’t like the plan, claiming it could force landlords to increase rents to recover their money. David Whitburn, Auckland Property Investors Association immediate past-president, was somewhat philosophical about the plan.

“Some form of regulation adverse to property investors is imminent.”

However, in terms of helping first-home buyers he believed other measures would be more effective.

“Why don’t we change the RMA, reduce costs, time and uncertainty in achieving resource consents, train and open migration doors even wider for those with skillset in the construction sector, and make changes to make longer-term tenancies with more control more palatable?”

Further thoughts not published in this article

The Reserve Bank are not trying to take out the whole market, just a portion of it with a number of properties. They want to ensure big investors are not over-geared for financial stability reasons, and seem to want to regulate to make the banks hold more capital for investors with big portfolios. My thoughts not published in this article are:

What is the definition of “big investor”. Surely it is not the number of properties – that is a rather entry level question as the location, type of property, condition of it, debt profile, cashflow it produces amongst other matters are also important to measure. I am interested in seeing the RBNZ’s definition of a big investor. Is it still five or more properties? Does it matter if these are five one bedroom units worth $17,000 in the impoverished foresty town of Kawerau in the Bay of Plenty, like ones mentioned in this article. Are you not a big investor with a home worth $5m, Waiheke Island bach worth $3.5m, and a Herne Bay and Epsom rental property each worth $2.8m. This is only 4 properties and two are for private use, so by some measures no! What about the gearing levels? What about the income derived? A lot more work needs to be done in defining a big investor and assessing the risks to the financial system.

Is there a significant problem with investors: since the 1 October 2013 introduction of the LVR restrictions to require 80% deposits on all but 10% of new lending for older homes (new builds are exempt), investors have increased their share from 36% to 40%. Hardly a game changer, and many people want to rent and not tie up large amounts of capital in property. I speak on this topic tomorrow at the Aotea Centre in the Auckland Conversations event – Renting in Auckland on a panel with Penny Hulse as Deputy Mayor of Auckland, and NZIER Principal Economist Shamubeel Eaqub. There are well over 500 registrations to this free event and not many seats left – so take action and register now if you want to hear the debate and ask a question from the audience on this topic.

Are other forms of regulation better: loan to income ratio, a hybrid loan to value and loan to income ratio, LVR restrictions to be greater on investors with a certain number of properties, etc.

Is this something the Reserve Bank should leave for Parliament to legislate on – the Labour and Green Parties would tell you ring-fencing of tax losses to deny deductions for portfolios making tax losses would fix this. They are probably right, but what will happen to rental levels in the meantime?

Can the Reserve Bank simply tell banks to hold a bit more capital against property loans?

Do we even need any more regulation?

There is a lot to contemplate with this policy and currently we can only speculate on what may or may not happen. Rest assure I will be given more comment to media as I have for radio recently, and I will let you know as soon as I hear something more concrete.

]]>http://www.davidwhitburn.co.nz/me-in-the-nz-herald-on-rbnz-policy-for-big-investors/feed/0New Zealand’s Bolder Brighter Notes for 2015/16http://www.davidwhitburn.co.nz/new-zealands-bolder-brighter-notes-for-201516/
http://www.davidwhitburn.co.nz/new-zealands-bolder-brighter-notes-for-201516/#commentsFri, 21 Nov 2014 22:51:29 +0000http://www.davidwhitburn.co.nz/?p=1207... read more]]>The Reserve Bank are giving are dollar notes a face lift for the first time since 1999. Our new paper money is to take advantage of new technology to further reduce the risk of counterfeiting and to have bolder, brighter notes. They do this. Here are the artistic impressions of the new notes:

These are subject to minor changes. I really like the changes to our bank notes and am impressed at the image quality. The $5 and $10 notes are scheduled for release in October 2015. The $20,$50 and $100 notes are scheduled for release in April 2016.

]]>http://www.davidwhitburn.co.nz/new-zealands-bolder-brighter-notes-for-201516/feed/0The Juggernaut of the Auckland Housing Market Continueshttp://www.davidwhitburn.co.nz/the-juggernaut-of-the-auckland-housing-market-continues/
http://www.davidwhitburn.co.nz/the-juggernaut-of-the-auckland-housing-market-continues/#commentsThu, 20 Nov 2014 22:33:45 +0000http://www.davidwhitburn.co.nz/?p=1192... read more]]>Earlier in the week I blogged about Auckland house prices which have risen 9.2% in the 12 months from 1 November 2013 to 31 October 2014 and are now 35.1% above our 2007 peak. Have a look at the graph from qv.co.nz below which divides Auckland into 14 sub-regions to see how prices are tracking. Some solid growth all round with the islands (Rakino, Waiheke, Great Barrier etc) showing solid growth after quiet times – this is lead by Waiheke Island. Rakino Island and Great Barrier Island property still look good with the special lifestyle they offer. Imagine what would happen if Rakino had a more regular ferry service – just look what happened to Waiheke Is in the 80s.

There is always a catch and this is land rates movements. A lot has been said on this tax already in all media. I have given comments to radio, TV, magazines and major newspapers on this subject. Basically check your rates on qv.co.nz as rating valuations are free to get until 19 December 2014 or on Auckland Council’s website (when it stops crashing from tens of thousands of us property loving Aucklander’s checking out our recent unrealised gains from the house price rises).

House prices are rising in New Zealand but is nowhere near uniform. The above QV Residential Price Movement Index shows that residential property values for October have increased 5.9% over the past year from 1 November 2013 – 31 October 2014. Therefore New Zealand house prices are now 16.9% above the previous market peak of October 2007. If we took the real prices into account (which remove the impact of inflation) then house prices are actually 0.2% below their October 2007 peak! Fortunately most people don’t take the time or don’t have the ability to adjust for inflation so they’ll perceive nationwide house prices to be up as mainstream media report the nominal rates of inflation. I use the real prices too, as inflation is another hurdle for inflation to process, and specifically note if I have used real (inflation adjusted) data.

Strugglers

Wanganui values are 6.2% lower in the past year and 19.0% below their 2007 peak. Similarly Gisborne values are down 1.9% in the past year but 21.9% below their 2007 peak. Timaru is down 14.3% since the 2007 peak and Invercargill has also been struggling with values still 8.0% below their 2007 peak. You don’t want to calculate the real values, as this is depressing. Slow or negative population growth and creation of stable employment opportunities are huge challenges to many regions and smaller cities in New Zealand.

Wellington is even struggling with values if we include properties in both Upper and Lower Hutt being just below the 2007 peak. Tauranga and Dunedin are the same with values below their 2007 peak too.

Winners

Christchurch property values are 22.2% higher than their 2007 peak with Christchurch City and the central and northern suburbs performing particularly well. The earthquake caused some significant supply issues, so the statistics are a bit less meaningful – what is important is housing people. Unfortunately Christchurch are behind early schedules of the time to take to rebuild this beautiful city.

Auckland is the undisputed heavyweight champion of New Zealand with strong natural population growth, strong migration, increased employment opportunities and a real feeling of confidence in the market. Auckland house prices have increased 2.5% from 1 August – 31 October 2014, 9.2% for 1 November 2013 – 31 October 2014 and are up 35.1% since 2007. With Auckland taking 1/3 of New Zealand’s population and over 1/3 of recorded sales, the data and biggest reason of the lift in nationwide house prices is Auckland.

For the technically minded Auckland’s real prices are 15.3% over the 2007 peak. I will blog on this later in the week.

]]>http://www.davidwhitburn.co.nz/house-prices/feed/0No removal of LVRshttp://www.davidwhitburn.co.nz/rbnz-policy-changes/
http://www.davidwhitburn.co.nz/rbnz-policy-changes/#commentsWed, 12 Nov 2014 22:44:49 +0000http://www.davidwhitburn.co.nz/?p=1202... read more]]>The Reserve Bank of NZ believe that there are housing market imbalances. In this month’s Financial Stability Report they said that “pressures have eased since the introduction of the loan-to-value ratio (LVR) ‘speed limit’ in October 2013 and subsequent increases in interest rates” which means that they are happier that housing market risks are manageable. However they cannot remove the LVR restrictions. Graeme Wheeler the RBNZ Governor said:

“We have always indicated that the LVR restrictions are a temporary measure. The reduction in house price inflation and housing credit growth are welcome developments, along with indications of increased residential building. However, there remains a risk of a resurgence in house price inflation, particularly in light of strong immigration flows. Consequently, we do not consider it appropriate to ease the LVR speed limit at this time. The Reserve Bank will continue to closely monitor the housing market.”

I believe that the LVR restrictions are bit tough, and adversely impact first-home owners. However the exemption for new builds is great, as this encourages the construction sector, creates new warmer drier healthier homes and gives the ability for 5% down to have a 95% loan subject to meeting qualifications for your own home. The LVR restrictions actually mean that the OCR has not risen as much as it otherwise would, because these restrictions reduce demand on the housing market.

Then Deputy Governor Grant Spencer said that, while housing risk has reduced, risks in the dairy sector have increased. “The forecast dairy pay out for the coming season has been reduced significantly, and could result in rising loan defaults should the lower pay out level persist”. Fortunately forecasts indicate the dairy pay-outs are likely to increase next year though, and banks are being good at rolling over interest-only terms and restructuring debt to reduce monthly payments by spreading debt repayments over longer periods and such like.

Make Money With Minor Dwellings Seminar

Join me and Ammon Acarapi by sparing around one hour and half of your time from the comfort of your own home at the FUZO Making Money from Minor Dwellings Webinar. This free event requires a computer with broadband or better connection, so you can watch from the comfort of your own home. It starts at 6:30 pm this Wednesday 26 November 2014 at the Century 21 conference room, Level 1, 272 Parnell Road, Parnell, Auckland and will be full of useful information.

We will share with you how our clients are generating great cash flow from Fuzo Minor Dwellings. Plus we will share how you can get the best returns in the Auckland property market right now this Thursday evening.

Your presenters Ammon Acarapi and I are both highly experienced investors, developers and property consultants with well over 200 minor dwelling developments between them.

Here’s what you will learn at this free 90 minute webinar:

Minor Dwelling Success… The what, where and how of Minor Dwellings success including the 3 fundamentals areas you must understand to make money.

Minor Dwellings for Cash Flow…step-by-step guide on how I amassed my property portfolio based on having a number of Fuzo minor dwellings.

Strategic Thinking…Why Fuzo minor dwellings are the best strategy in today’s market.

The Property Clock Window… Why a window of opportunity exists for minor dwellings right now and how you can profit from it.

Investment Sense… How minor dwellings will outperform other property investments over the next couple of years.

Model Our Success... How you can connect with the vast experience of Fuzo with well over 200 minor dwellings completed.

Turnkey Minor Dwellings…How Fuzo provides you with a turnkey solution, from finding a minor dwelling-able property for you, to obtaining all necessary consents, to building it and obtaining Code of Compliance Certificate so you can get income and value from your investment.

Don’t take second best and make a poor investment decision. Come to this webinar before you buy any property in Auckland, as you don’t want to limit your cashflow or equity.

Get on the front foot and take action today by coming to this free webinar. Book now before someone else gets your place at our webinar.

Feel free to call the FUZO office with any questions on (09) 551 6952 or contact Ammon Acarapi, Fuzo’s General Manager on 021 304 506.

]]>http://www.davidwhitburn.co.nz/hear-me-at-the-fuzo-minor-dwelling-webinar-this-thursday-at-730pm/feed/0Interest Rate Table for NZ’s largest banks at 31.10.2014http://www.davidwhitburn.co.nz/interest-rate-table-for-nzs-largest-banks-at-31-10-2014/
http://www.davidwhitburn.co.nz/interest-rate-table-for-nzs-largest-banks-at-31-10-2014/#commentsFri, 31 Oct 2014 01:10:45 +0000http://www.davidwhitburn.co.nz/?p=1183... read more]]>This is a table of the main banks and the interest rates they are offering, including their special rates. The interest swap rates are shown below for a comparison.

Lender

Floating

1 year

2 years

3 years

4 years

5 years

ANZ

6.74%

5.69%

5.75%

6.09%

6.79%

6.99%

ASB

6.75%

5.70%

5.75%

6.19%

6.80%

6.99%

BNZ

6.74%

5.89%

5.75%

5.85%

6.79%

6.99%

Kiwibank

6.65%

5.79%

5.75%

6.19%

6.69%

6.79%

Westpac

6.69%

6.09%

5.75%

6.65%

6.79%

6.49%

Average

6.71%

5.83%

5.75%

6.19%

6.77%

6.85%

Swap Rates ^

3.50%

3.73%

3.87%

3.99%

4.08%

4.16%

Difference

3.21%

2.10%

1.88%

2.20%

2.69%

2.69%

^ the Official Cash Rate (OCR) has been used for the floating rate, and then the interest/swap rates at 12 noon today for 1 – 5 year fixed periods.

What’s happening?

This table shows discounting in the 1, 2 and 3 year fixed periods with the difference between the swap rates and the main banks’ carded rates (including special rates) being squeezed. Few borrowers are choosing 4 and 5 year rates now, and whilst heavy discounting of floating interest is available with a 3.21% margin, fewer borrowers are floating now too. If you are floating make sure you ask your lender for a discount or use a package discount that many groups have like your local property investor association, work, club etc. I see real value in the 2 and 3 year rates right now.

]]>http://www.davidwhitburn.co.nz/interest-rate-table-for-nzs-largest-banks-at-31-10-2014/feed/0Interest Rates will be lower for longerhttp://www.davidwhitburn.co.nz/interest-rates-will-be-lower-for-longer/
http://www.davidwhitburn.co.nz/interest-rates-will-be-lower-for-longer/#commentsWed, 29 Oct 2014 23:35:44 +0000http://www.davidwhitburn.co.nz/?p=1179... read more]]>The OCR was kept by the Reserve Bank of New Zealand at 3.50% as widely expected. The most interesting part of this this morning’s announcement by Dr Wheeler as RBNZ Governor was that he dropped any mention of future rate increases. There is a very real possibility that we will not see any further interest rate increases as overseas countries have extremely low reported inflation and they have big fears of deflation.

Inflation figures gave came in at just 1.0% for the year meaning we are right at the bottom end of the RBNZ’s target bank from 1 – 3%. This has put little pressure on increasing interest rates, so exporters and borrowers will be happy. ANZ Bank’s chief economist has predicted that there will be no more rises in the OCR until December 2015. The peak OCR for this interest rate cycle was predicted by most economists to rise to 4.50% this cycle which has now been dialed back down to 4.00 – 4.25%.

My view is that we need interest rate rises like the desert needs more sand. There is a lot of pain in the regions, with some suffering from low or no wage growth, increasing unemployment and falling house prices. If the RBNZ is worried about housing affordability being stimulated by an interest rate cut, then a mixed loan to income and loan to value ratio could be applied.

]]>http://www.davidwhitburn.co.nz/interest-rates-will-be-lower-for-longer/feed/0The Best Strategy for the Current Market in Aucklandhttp://www.davidwhitburn.co.nz/the-best-strategy-for-the-current-market-in-auckland/
http://www.davidwhitburn.co.nz/the-best-strategy-for-the-current-market-in-auckland/#commentsMon, 15 Sep 2014 06:18:27 +0000http://www.davidwhitburn.co.nz/?p=1154... read more]]>Right now the average Auckland gross yield is below 4.0% and is showing no signs of turning around. Houses prices are rising year on year in Auckland even despite the OCR rising 1.0% over the past few months, dairy prices falling and an election looming in 5 days time. See my top 5 reasons why Auckland house prices are rising. In a market with supply constraints and strong demand with migration around all-time high levels, it is little surprise the average Auckland gross yield is below that of most term deposit rates.

What can you do to get cashflow?

I have blogged and presented about the importance of cashflow if you want to build a serious property portfolio. However buying an average Auckland property will not cut the mustard anymore. You have to work for the result. My challenge to you is not to be average. Instead look at the best strategy for today’s Auckland property market by creating a FUZO Minor Dwelling.

You can hear all about these at the FUZO Webinar on Thursday 18 September at 7:30pm.

The Best Strategy

Property investment is all about Cashflow, Equity and Growth. The best property investment portfolios have a mixture of all of these. Without cashflow you can be exposed to Government policy changes , interest rate hikes, you may have to heavily subsidise loan repayments, not qualify for purchasing future bank loans, or worse be forced to sell a property during a recession or slump phase of the property cycle. Without equity you have no buffer and an inability to revalue, and in general feel insecure at your lack of equity in your portfolio, which could get further eroded in the years ahead by sales fees and commissions, inflation and taxes. Without growth you can get the psychological feeling you are going nowhere slowly!

The best investments are ones that generate cashflow, so you have more money in your pocket at the end of the month than you had at the start, create equity to give you a buffer and more confidence to invest, and are positioned for strong growth. Investing in the world’s 3rd most liveable city and New Zealand’s economic hub, Auckland virtually guarantees strong growth. Our under-supply coupled with strong demand points to one direction prices can go in the long-term, and unlike many parts of New Zealand, that direction is not down.

So with the average Auckland gross yield dipping below 4.0% how can I get cashflow if I don’t like high-rise CBD apartments.

Minor Dwellings

Minor Dwellings are where you have two houses on the same legal title. Generally you would build a minor dwelling of 60 – 65sqm in size with a kitchen, bathroom and separate electrical and water metres and a code of compliance certificate. It is completely legal to rent a minor dwelling out separately in Auckland. I have FUZO minor dwellings in my own portfolio renting from $390 – $435/week in both South and West Auckland. FUZO Minor Dwellings are the best strategy in the Auckland property market currently.

FUZO are run by Auckland’s leading minor dwelling developers Ammon Acarapi and me! We have done well over 200 minor dwellings in just over a decade, so are true minor dwelling experts. We have come across every problem and solved them, including telling clients and our team of property finders to walk away from sites.

We are the only company as far as we are aware that provides a specialist minor dwelling finding and due diligence service, complete with a 10 year home and income cashflow and equity spreadsheet, building and resource consenting service, construction service and can refer you to leading property managers in the suburb your property is in so you get cashflow fast.

Essentially FUZO offers you the ability to connect with experience and essentially get professionals ensure you get two properties for the price of one and half.

Benefits of FUZO Minor Dwellings

FUZO have made a number of fellow property millionaires and are very proud of this fact. We advocate the Improve and Hold strategy, which is a variant of the Buy & Hold strategy. It is safer, smarter and works for most investors wanting to participate in the success and growth of our nations economic hub, Auckland, but with a much higher cashflow than average.

i. de-risk your investment by ensuring it pays for itself;
ii. maximise the returns from your property by getting as much returns as you can; and
iii. demonstrate strong cashflow returns to the bank so that you can get your next property.

In my opinion ten years is the minimum timeframe you should be looking at investing in a FUZO minor dwelling. I can assure you that there are far worse things you can do than hold a Auckland property with a cashflow positive FUZO minor dwelling on it for at least ten years.

Find Out Yourself about how FUZO Minor Dwellings can work for you, and about our processes. This is also great to attend if you have over 600sqm of land in Auckland and wish to see whether you can have a Fuzo minor dwelling.

So don’t delay, BOOK NOW for the FUZO Webinar presented by both Ammon Acarapi and me. Looking forward to seeing you there to sharing much more information on the best strategy in the Auckland property market today.